Nelson City Council maintains AA/A-1+ credit rating with a stable outlook

05/12/2022 10:41am

S&P Global’s credit rating report for Nelson City Council outlines the financial balancing act required to meet the costs of August’s severe weather event. The agency maintained its AA/A-1+ rating with a stable outlook.

Noting an expected bill of between $40m to $60m to repair Council infrastructure, the report predicts “moderate after-capital-account deficits and higher debt than in the past”, but with the expectation that Nelson’s debt will remain in the mid-range of other councils over the next two years. 

Nelson Mayor Nick Smith says while it is pleasing to see Council maintain its stable rating, there would be some hard decisions ahead as to which projects are delayed and which stay on track. 

“It is good news that we have retained our good credit rating despite the large costs from August’s severe weather event. It matters because it affects the interest rates we pay and our ability to raise funds for future projects or disaster events.   

“This report from S&P Global gives us confidence in Council’s robust financial management. We now need to navigate a way forward that gets our infrastructure fixed while keeping our rates affordable for the current generation and debt manageable for future generations. 

“S&P correctly notes Council will manage the unexpected cost from the August 2022 storm by delaying some other capital expenditure items. The financial challenges facing Council this term will be the toughest in decades. We have the combination of the August storm costs as well as the economic storm of the rapidly rising interest rates and the highest inflation in 30 years.  

“It is inevitable rates will need to be increased next year, but our challenge is to keep these increases affordable at a time when households and businesses are also under pressure. We will need to take a careful approach to debt and manage it prudently while ensuring we invest in the infrastructure to improve Nelson’s resilience to major weather events and increase our capacity to meet housing growth.” 

The report assumes Nelson will spend $59m a year on capital work, a substantial increase from pre-pandemic levels of $30 to $35m. This elevated programme was mainly responsible for debt remaining higher than in the past.